Bankruptcy proceedings are complex. The process is managed by registered professionals to ensure honesty, fairness and compliance.
These registered professionals are referred to as ‘Trustees’. It’s their responsibility to administer bankrupt estates, coordinate creditor claims and protect the interests of everyone involved.
What is a Bankruptcy Trustee?
A Bankruptcy Trustee is a registered professional (or body of professionals) that is charged with administering a bankrupt estate. The Trustee has a responsibility to protect the interest of the creditors and the bankrupt individual.
The Trustee is appointed by the bankrupt individual, the creditors or the court, depending on the circumstances of the matter. There are two types of Trustees:
- Registered Trustee – A Registered Trustee is a qualified insolvency practitioner (or group of practitioners) that is registered with the Australian Financial Security Authority (AFSA).
- Official Trustee – The Official Trustee is a body corporate operated by AFSA. The Official Trustee will administer your bankruptcy if a Registered Trustee is not appointed, or when an estate has little or no assets.
Appointing a Registered Trustee generally provides a better experience for bankrupt individuals. If you are declaring bankruptcy, a Registered Trustee can provide advice on the best course of action and support you throughout the process.
Who Can Be a Trustee in Bankruptcy?
The Trustee in bankruptcy must be a person (or group of people) who are appropriately qualified and have registered with AFSA.
A person must be considered “fit and proper” to register as a bankruptcy practitioner. While the Bankruptcy Act does not define standards for determining who is fit and proper, the applicant must demonstrate:
- Proper qualifications (Accounting and/or Law)
- Current knowledge, experience and abilities in the field (a minimum of 4,000 hours of relevant employment at a senior level)
- Honesty, integrity, diligence, judgement and good character
Applications are made to AFSA and the eligibility criteria are strictly applied.
What are the Duties of a Bankruptcy Trustee?
The Bankruptcy Trustee has a duty to administer the bankrupt estate to the benefit of creditors. This involves:
- Controlling the bankrupt estate
- Reviewing and approving overseas travel requests from the bankrupt
- Investigating the financial affairs of the bankrupt
- Communicating with creditors and managing creditor claims
- Conducting creditor meetings
- Gathering, protecting and selling assets
- Recovering voidable transactions
- Administering a trust containing money raised from the sale of assets
- Distributing dividends to creditors in the predetermined order
- Reporting misconduct to AFSA and/or the ATO
The full responsibilities of the role depend on the complexity of the bankrupt estate. For example, if the director of a company is made bankrupt, the Trustee may also be required to liquidate the company in order to repay creditors.
How a Bankruptcy Trustee Can Help
Bankruptcy Trustees have a duty to the creditors and to the bankrupt individual. While the role is largely financial, a Registered Trustee may provide help in some of the following ways:
- Discussing your options and searching for the best solution to your financial situation
- Communicating with creditors
- Managing creditors claims
- Negotiating payment arrangements with secured creditors (whose debts are not included in the bankruptcy)
- Providing financial education and advice
- Protecting your interests throughout the bankruptcy
- Ensuring you meet your obligations to avoid further issues
The bankruptcy process can be confronting for individuals. An experienced Trustee will work with you to provide as much support as possible, helping you to navigate a stressful time in your life.
How Do I Replace a Trustee in Bankruptcy?
The creditors can request that the Trustee call a meeting to consider replacing the Trustee in Bankruptcy. The Trustee is required to call a creditors’ meeting where:
- Creditors pass a resolution directing the Trustee to call a meeting; OR
- Creditors representing at least 25% in value request a meeting in writing; OR
- A meeting is requested by creditors representing 10%-25% in value, and creditors provide the Trustee with security that covers the cost of holding the meeting.
Creditors may consider replacing the Trustee where there are disputes about the Trustee’s intended actions of asset realisation strategies.
Learn How the Registered Trustees at SV Partners Can Help
SV Partners is a team of Registered Trustees that provide support for a broad variety of personal insolvency issues. Our qualified and experienced professionals work with clients across Australia, helping you reach the best outcome possible.
We consider bankruptcy a final solution and will work with you to discuss your options and consider every alternative. If you decide to proceed with bankruptcy, we will minimise your stress and make the process as smooth as possible.
Contact us and book a confidential consultation if you are concerned about your financial situation.
